Module 4Module 4

Focusing on Customers

1

Quiz

• What is the difference between explicit and tacit knowledge?

• Deming’s 14 Points: Which ones can you name/remember?

2

Deming’s 14 Points (Abridged) (1 of 2)

3

1. Create and publish a company mission statement and commit to it.2. Learn the new philosophy.3. Understand the purpose of inspection.4. End business practices driven by price alone.5. Constantly improve system of production and service.6. Institute training.7. Teach and institute leadership.8. Drive out fear and create trust.

Deming’s 14 Points (2 of 2)

4

9. Optimize team and individual efforts.10. Eliminate exhortations for work force.11. Eliminate numerical quotas and M.B.O. Focus on improvement.12. Remove barriers that rob people of pride of workmanship.13. Encourage education and self-improvement.14. Take action to accomplish the transformation.

www.deming.org

Importance of Customer Satisfaction and Loyalty

• “Satisfaction is an attitude; loyalty is a behavior”

• Loyal customers spend more, are willing to pay higher prices, refer new clients, and are less costly to do business with.

• It costs between five-ten times more to find a new customer than to keep an existing one happy.

5

Importance of Customer Satisfaction and Loyalty

• Johnson Controls • 91% contract renewals from satisfied or very

satisfied customers• 1% point increase in overall satisfaction = $13

million in service contract renewals annually

• Research in 2008 revealed that companies with a 98% customer retention rate were twice as profitable than those with 94%.

6

American Customer Satisfaction Index

7

ACSI Model of Customer Satisfaction

8

Perceivedquality

Customercomplaints

Perceivedvalue

Customer satisfaction

Customerexpectations

Customerloyalty

Customer-Driven Quality Cycle

9

measurement and feedback

Customer needs and expectations (expected quality)

Identification of customer needs

Translation into product/service specifications (design quality)

Output (actual quality)

Customer perceptions (perceived quality)

PERCEIVED QUALITY = ACTUAL - EXPECTED

Leading Practices (1 of 2)

• Define and segment key customer groups and markets

• Understand the voice of the customer (VOC)

10

Leading Practices (2 of 2)

• Understand linkages between VOC and design, production, and delivery

• Build relationships through commitments, provide accessibility to people and information, set service standards, and follow-up on transactions

• Effective complaint management processes• Measure customer satisfaction for

improvement11

Experiment

• Have one of your classmates time you while you wait for varying amounts of time between 2 to 4 minutes. Try not to count the seconds! Estimate the amount of time you waited.

• What does this experiment mean for organizations that are trying to set service standards?

12

Key Customer Groups

• Organization level– consumers– external customers– employees – society

• Process level– internal customer units or groups

• Performer level– individual internal customers

13

Identifying Internal Customers• What products or services are produced?• Who uses these products and services?• Who do employees call, write to, or answer

questions for?• Who supplies inputs to the process?

14

AT&T Customer-Supplier Model

15

Requirementsand feedback

Requirementsand feedback

Your Suppliers

YourProcesses

YourCustomers

Inputs Outputs

Customer Segmentation

• Demographics• Geography• Volumes• Profit potential

16

Key Dimensions of Quality• Performance – primary operating characteristics• Features – “bells and whistles”• Reliability – probability of operating for specific time

under conditions of use• Conformance – degree to which characteristics match

standards• Durability – amount of use before deterioration or

replacement• Serviceability – speed, courtesy, and competence of

repair• Aesthetics – look, feel, sound, taste, smell

17

Can you think of a product that is reliable but contains low durability?

Key Dimensions of Service Quality

• Reliability – ability to provide what was promised• Assurance – knowledge and courtesy of

employees and ability to convey trust• Tangibles – physical facilities and appearance of

personnel• Empathy – degree of caring and individual

attention (rendering authenticity)• Responsiveness – willingness to help customers

and provide prompt service

18

Service Quality

19

Kano Model of Customer Needs

• Dissatisfiers: expected requirements• Satisfiers: expressed requirements• Exciters/delighters: unexpected features

20

Customer Listening Posts

• Comment cards and formal surveys• Focus groups• Direct customer contact• Field intelligence• Complaint analysis• Internet monitoring

21

Tools for Classifying Customer Requirements

22

Affinity diagram

Tools for Classifying Customer Requirements (Cont.)

23

Tree diagram

Customer Relationship Management

• Accessibility and commitments• Selecting and developing customer contact

employees• Relevant customer contact requirements• Effective complaint management• Strategic partnerships and alliances• Customer Integration*

24

Measuring Customer Satisfaction

• Discover customer perceptions of business effectiveness

• Compare company’s performance relative to competitors

• Identify areas for improvement• Track trends to determine if changes result

in improvements

25

Measuring Customer Satisfaction

Effective customer satisfaction measurement systems result in?

•Reliable Information– About?

•Customer Ratings•Future Behavior

26

Example: The Olive Garden• The Lobby

– Was the lobby staff friendly and did they welcome you to the restaurant?

– Were you seated in a timely, efficient manner?

• The Table Area– Was your table area clean when you were

seated?

• The Server– Was your server attentive and there when

you needed him/her?– Was your server knowledgeable and able

to answer your questions about our food and beverages?

– How was the pace of your meal?

• The Food– How would you rate the taste of

your food?– Please rate the temperature of your

food, hot food being piping hot.– Please rate your visit on the value

for the money.– Overall, how would you rate your

visit– Would you recommend this Olive

Garden to a close friend or relative?

27

Scale: 1 = poor ….5 = excellent

Example: The Olive Garden

• Open-ended questions:– What one thing did you like most about your

visit?– What one thing could we do to improve your

experience at The Olive Garden?

• Survey form provides address, 800 number, FAX, and TDD number for hearing impaired

• Travel Websites / Applications

28

Performance-Importance Analysis

29

Performance

Importance

Low High

High

Low

Vulnerable Strengths

Who Cares? Overkill

Difficulties with Customer Satisfaction Measurement

• Poor measurement schemes• Failure to identify appropriate quality

dimensions• Failure to weight dimensions appropriately• Lack of comparison with leading competitors• Failure to measure potential and former

customers• Confusing loyalty with satisfaction

30